Two informed sources revealed that the Russian government is discussing multiple approaches to assist Russian Railways, the country's largest commercial employer, which has accumulated 4 trillion rubles ($51 billion) in debt.

State-controlled Russian Railways employs approximately 700,000 people. The company's revenue has declined due to Russia's wartime economic slowdown, while its debt costs have surged under the highest interest rates in two decades.

Due to the sensitivity of the matter, the two anonymous sources stated that the government has begun discussions on how to help the company manage its debt—most of which is owed to state-owned banks.

Potential rescue measures include raising freight prices, increasing subsidies, reducing taxes, or even tapping into the National Wealth Fund. Raising rail freight prices would particularly impact Russian exporters of coal, metals, petroleum products, grain, and chemicals, who are already under pressure from economic deceleration and high borrowing costs.

One source noted that Russian officials held meetings in late November to discuss the situation and plan to reconvene in December. As of publication, Russian Railways, the government, and the transport ministry have not responded to requests for comment.

Proposals not yet under formal government consideration include capping Russian Railways' interest payments at 9% or converting its debt into equity—effectively granting state-owned banks partial ownership of the company.

**Debt-for-Equity Swap Proposed** One source mentioned a proposal to convert 400 billion rubles of Russian Railways' debt into equity, which alone could save the company 64 billion rubles in interest payments over three years.

These measures are described as efforts to rescue Russian Railways, which operates the world's third-largest rail network after the U.S. and China.

However, disagreements among representatives from Russia's finance, economy, transport, and trade ministries mean the final decision remains uncertain.

Under international accounting standards, Russian Railways reported 2024 revenue of 3.3 trillion rubles against expenses of 2.8 trillion rubles.

**Debt Surge Raises Alarms** In its first-half 2025 financial report, the company disclosed net debt of 3.3 trillion rubles as of June 30, including 1.8 trillion rubles in short-term liabilities. The reason for the 700 billion ruble surge in debt over six months remains unclear.

Russian Railways operates nationwide—from the Pacific to the Black and Baltic Seas—handling passenger transport, oil, and freight. It has long been viewed as a barometer of Russia's economic health.

The company's struggles highlight challenges in Russia's state-dominated wartime economy, where "too big to fail" enterprises owe massive debts to state banks, ultimately requiring government intervention. Meanwhile, military spending remains at historic highs as the Ukraine conflict nears its fourth year.

**Putin-Era Wartime Economy Cools Sharply** From 2000 to 2008, during Vladimir Putin's first two presidential terms, Russia's economy grew from under $200 billion in 1999 to $1.7 trillion. Today, nominal GDP stands at roughly $2.2 trillion—on par with 2013, the year before Crimea's annexation—with growth expected to slow significantly this year.

The government forecasts 2025 GDP growth at 1.0%, down from 4.3% in 2024 (2023 growth was 4.1%). The IMF has further downgraded its 2025 projection for Russia from 0.9% to 0.6%.

While the West aims to weaken Russia's economy to pressure the Kremlin over Ukraine, Putin insists Russia will not yield to external pressure, with officials prioritizing military objectives over economic concerns.

Putin claims Russia's economy has outperformed expectations despite thousands of Western sanctions and remains largely debt-free compared to Western nations. Still, he acknowledges challenges in investment and the impact of high interest rates.

A senior executive at Sberbank, Russia's largest bank, told Reuters the economy is undergoing "sustained cooling," with growth likely around 1% next year and weak business activity persisting for the next 4-5 quarters.